efaq: Problems with Shell Mode
6.3 Why do I get an error message when I try to run ‘M-x shell’?
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This might happen because Emacs tries to look for the shell in a wrong
place. If you know where your shell executable is, set the variable
‘explicit-shell-file-name’ in your ‘.emacs’ file to point to its full
file name.
Some people have trouble with Shell Mode on MS-Windows because of
intrusive antivirus software; disabling the resident antivirus program
solves the problems in those cases.